Quick Take: Reynolds and Lorillard Could Own the E-Cigarette Market

The rumor of an impending deal between Reynolds Tobacco and Lorillard Tobacco have both stocks tfired up.

NEW YORK (TheStreet) -- Reynolds American (RAI) is reportedly in talks to work out a deal with or for Lorillard (LO), according to the Financial Times. TheStreet's Debra Borchardt said Reynolds American is known for its Camel and Pall Mall brands. The company is 42%-owned by London-based British American Tobacco (BTI).

Lorillard is known for its brands Maverick and Newport, the latter the top-selling menthol cigarette in the U.S., Borchardt said. The company also has a commanding lead in the e-cigarette business, with its industry-leading product, Blu.

So it makes perfect sense why Reynolds American would want to acquire Lorillard, she pointed out.

However, the deal could push north of $20 billion, she said. That's why Wells Fargo analyst Bonnie Herzog suggests that perhaps a merger between the two tobacco giants may be a more likely outcome.

Borchardt suggested a merger between the two companies would allow for them to reach a strategic partnership for global distribution of e-cigarettes. Shares of the two companies are on fire, figuratively. Reynolds American is up 10% since Monday's open, and Lorillard is up roughly 14% in the same time.